The Role of Absorptive Capacity and Firm Openness Strategies on Innovation Performance

The Role of Absorptive Capacity and Firm Openness Strategies on Innovation Performance

Gad David Kashosi (University of Science and Technology, Beijing, China), Yang Wu (University of Science and Technology, Beijing, China), Gutama Kusse Getele (University of Science and Technology, Beijing, China), Epede Mesumbe Bianca (University of Science and Technology, Beijing, China) and Eric Irakoze (University of International Business and Economics, Beijing, China)
Copyright: © 2020 |Pages: 16
DOI: 10.4018/IRMJ.2020100101
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Abstract

Openness and absorptive capacity are both based on the notion that organizations can use external knowledge to increase their innovation outcome. The objective of this paper is to investigate the joint effect of openness strategies, firms' absorptive knowledge capacity, and the innovation performance of SMEs in a developing country. By using structural equation modeling (SEM) through PLS, the results show that internal practices and means for attracting external knowledge improve innovation performance and indicate that absorptive capacity mediates open search breadth and partially open search depth to affect innovation performance. These results highlight the additional nature of absorptive capacity and reinforce the knowledge of scholars in particularly developing countries.
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Introduction

The theory of open innovation (OI) emphasizes the idea of leveraging external knowledge search (EKS), and has become gradually prevalent both in industry practices and academic research (West, Salter, Vanhaverbeke, & Chesbrough, 2014). However, EKS is not an easily controllable resource because of its intangible nature, its origin or its level of exploitation (Cantner, Meder, & Wolf, 2011). Nevertheless, there is a constrained understanding of its acquisition and implementation into the firm’s internal resources (Clausen, 2013). Additionally, the integration and assimilation of external knowledge (EK) into the firm's (internal) knowledge base can only occur if the firm possesses internal competencies that support OI processes. Therefore, a deeper understanding regarding OI is crucial to apprehend this sourcing process.

The challenge is not only to explore and access external information, but also the ability to internally produce inventive results by bringing together the company's external perspectives and internal competences. Thus, EKS may not profit all enterprises equally, since the company's assets and activities regulate to what extent it can benefit from them (Fabrizio, 2009). The study conducted by (Chen, Chen, & Vanhaverbeke, 2011) shows that innovation has a different trajectory depending on the geographical area where it is conducted. In addition to the cultural differences that characterize different geographical areas, the literature equally highlights the existence of different methods of approaching open innovation. In this perspective, it appears that the outcome in developed and developing countries may not be the same.

The literature emphasizes that for the implementation of open innovation to be effective, it must be done in parallel with key competencies, called “absorptive capacities” (Men, Fong, Luo, Zhong, & Huo, 2019). These “capabilities” are described by (Egbetokun & Savin, 2014) Flatten, Engelen, Zahra, & Brettel, (2011) and (Teece & Pisano, 1994) as the key drivers of a successful innovation. In this vein, OI and AC are founded on the notion of companies being able to use externally generated knowledge. Above all, AC is dedicated to the acquisition and use of external knowledge inside the company. It is a set of organizational routines and processes by which the firm or system acquires, assimilates, transforms, and exploits knowledge to produce dynamic organizational capacity (Zahra & George, 2002). This is a fundamental aspect of the outbound and inbound of OI. In this regard, we seek to understand how developing countries like Kenya can take advantage of open innovations that have proven to be relevant for innovation through their internal resources to improve their perceived poor innovation performance.

Despite the importance of EKS in literature, research works seeking to better understand the relationship between EKS, innovation performance (IP) and absorptive capacity (AC) are still rare, particularly in developing countries, since most approaches remain incomplete and fragmented (Ardito & Messeni Petruzzelli, 2017; Ferreras-Méndez, Fernández-Mesa, & Alegre, 2016; Flor, Cooper, & Oltra, 2018; Fosfuri & Tribó, 2008; Spithoven, Clarysse, & Knockaert, 2010). Chen et al., (2011) argue that the industrial environment of an organization can positively or negatively affects the OI outcome. Indeed, several theoretical problems arise concerning this notion: firstly, existing research works show a limited level of understanding of the meaning and nature of the link between EKS and AC (Chiang & Hung, 2010b; Flor et al., 2018a). Secondly, studies on the interaction between EKS and IP are few because of the difficulty of measuring the significance of knowledge asset (Popadiuk & Choo, 2006).

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